On Feb 1, 2018, Goldman Sachs GS predicted that the average price of Brent crude would cross $80 a barrel in 2018. The investment bank backed this claim with the assumption that U.S. producers would not be able to meet rising global demand for oil. Further, OPEC and Russia’s deal on production curb would further push prices higher. However, on closer examination, such a claim does not seem credible.

Shale producers in the United States are on track to surpass the 11-million barrels per day threshold this year. Moreover, the most-recent oil rally will only encourage shale producers to ramp up drilling and production. Lower production costs and cost-effective technology will also boost shale production.

Finally, increasing shale production has heated up global markets as compliance to the OPEC-Russia production curtail deal means that compliant countries would have to keep curbing production even as prices rise and inventories dwindle. Speculation that the production curb deal would be breached has also surfaced. Under such circumstances, when prices fall in the future, it is difficult to digest Goldman’s claims since prices could find little support in the future…